Mortgage Commentary on Massachusetts Mortgage Rate Trends
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This week brings us the release of five pieces of economic data for the markets to digest, with two of them considered to be highly important for Massachusetts mortgage rates. It is a shortened trading week with the stock and bond markets closed tomorrow in observance of the Martin Luther King Jr. holiday. The financial and mortgage markets will reopen Tuesday morning for regular trading hours. Therefore, there will be no update to this report tomorrow morning.
The first report of the week will be posted early Wednesday morning when the Labor Department’s Producer Price Index (PPI) will be posted at 8:30 AM ET. The PPI is important to the markets and Massachusetts mortgage rates because it measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.1% increase in the overall reading and a 0.1% increase in the more important core data reading that excludes volatile food and energy prices. A larger than expected increase in the core reading could mean higher Massachusetts mortgage rates Wednesday since inflation is the number one nemesis of the bond market. It erodes the value of a bond’s future fixed interest payments, making them less attractive to investors. Accordingly, they are sold at a discount to offset the drop in value, which drives their yields higher. And since Massachusetts mortgage rates follow bond yields, this means higher rates for borrowers.
December’s Industrial Production report is also on Wednesday’s agenda with a release time of 9:15 AM ET. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.5% from November’s level. A smaller than expected increase would be considered good news for bonds and could help lower Massachusetts mortgage rates, but the PPI is by far the most important data of the day for the bond market and will have the biggest impact on that day’s Massachusetts mortgage pricing.
Thursday also has two relevant reports scheduled. December’s Consumer Price Index (CPI) at 8:30 AM is the first. This is also one of the most important monthly reports that we see each month since it measures inflationary pressures at the consumer level of the economy. As with the PPI, there are two readings in the release. The overall index is expected to rise 0.1% while the core data is expected to increase 0.1%. Weaker than expected readings should lead to bond improvements and lower Massachusetts mortgage rates Thursday morning.
Last month’s Housing Starts report is the second of the day, also at 8:30 AM. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don’t see it causing much movement in Massachusetts mortgage rates Thursday, especially since it follows the very important CPI.
Friday has the remaining report, December’s Existing Home Sales at 10:00 AM ET. The National Association of Realtors will give us this housing report, which tracks home resales in the U.S. It is expected to show an increase in home sales last month, meaning that the housing sector strengthened. Ideally, the bond market would prefer to see a decline in sales, but a small increase should not negatively affect Massachusetts mortgage rates Friday.
Overall, Tuesday will probably be the least active day for Massachusetts mortgage rates with nothing of relevance scheduled, unless something drastic happens over the holiday. The most important day will likely turn out to be Wednesday or Thursday with the two key inflation readings being released. But the stock markets and news from overseas can be a big influence on bond trading and Massachusetts mortgage pricing any day, so maintaining contact with your mortgage professional is recommended.
Lock or Float Advice based on Massachusetts Mortgage Rate Trends
If I were considering purchasing or refinancing a home and predicting likely Massachusetts mortgage rates, I would…
Lock if my closing was taking place within 7 days…
Float if my closing was taking place between 8 and 20 days…
Float if my closing was taking place between 21 and 60 days…
Float if my closing was taking place over 60 days from now…
This is only a general opinion of what I would do if I were considering whether to lock or float based on Massachusetts mortgage rate trends. Your individual situation may be different.
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